Today I’m joined by John Dearie — founder and president of the Center for American Entrepreneurship, a nonpartisan policy and advocacy organization in Washington, D.C.
As the policy director at the Financial Services Forum, a CEO-led industry association, John had a front-row seat to the 2008 financial crisis. In the wake of that upheaval, he began to realize something critical: Washington’s traditional stimulus playbook was no longer working. Policymakers were out of fresh ideas for how to spark real economic growth and job creation.
That insight led him to a powerful revelation: entrepreneurship is the engine of the American economy — and it’s profoundly misunderstood.
In our conversation, John offers a behind-the-scenes look at how the economy really works — and what most people, including policymakers, get wrong about entrepreneurship. We explore the surprising data that changed his perspective, the policies that could unlock innovation, and why mindset — not capital — is the most important entrepreneurial resource.
If you’ve ever wondered how everyday entrepreneurs can reshape our economy and our future — this episode is for you.
—
Listen to the podcast here
The Entrepreneurial Imperative With John Dearie
In this episode, I’m joined by John Dearie, Founder and President of the Center for American Entrepreneurship, which is a non-partisan policy and advocacy organization based in Washington, DC. As the Policy Director at the Financial Services Forum, John had a front-row seat to the 2008 financial crisis. In the wake of that upheaval, he began to realize something critical. Washington’s traditional stimulus playbook was no longer working. Policymakers were out of fresh ideas for how to spark real economic growth and job creation. That insight led him to a powerful revelation. Entrepreneurship is the engine of the American economy, and yet it is profoundly misunderstood.
In our conversation, John offers a behind-the-scenes look at how the economy really works and what most people, including policymakers, get wrong about entrepreneurship. We explore the surprising data that change his perspective, the policies that could unlock innovation, and why mindset, not capital, is the most important entrepreneurial resource we have. If you ever wondered how everyday entrepreneurs can reshape our economy and our future, this episode is for you. Let’s dive in.
—
John, welcome to the show.
Thanks for having me on. I appreciate it.
John Dearie’s Journey: From Finance To Entrepreneurship Advocacy
Let’s jump in and tell me about where your interest in entrepreneurship started. You’re the CEO of the American Center for Entrepreneurship. How did you get into this?
It was quite happenstantial, if that’s a word. The vast majority of my career was in banking and financial policy. I started my postgraduate career at the Federal Reserve Bank of New York, where I was for ten years in the ‘90s. I left there and went to an organization that was new at the time called the Financial Services Forum, which was an economic and financial policy group.
It was a membership organization, and the members were the chief executives of the twenty largest financial institutions in the United States. It was people like Hank Paulson of Goldman Sachs and Jamie Dimon, JPMorgan Chase, Brian Moynihan, Bank of America, and seventeen others. Unfortunately, at the time, it was all guys. There have been women in recent years. As a matter of fact, I believe the most recent chair of the Financial Services Forum is the CEO of Citigroup, who is a woman, so progress has been made on that front.
I was at the Financial Services Forum first as the policy director starting in 2000, and then I ended my time at the Forum seventeen years later as the acting CEO. The defining experience of my career up until the point that I left to start CAE was the financial crisis of 2008 and 2009. I had a ringside seat to that crisis because, in terms of the Forum, I was working for the institutions that were either teetering or failing. I was the policy director. I was in the room for many of the meetings that folks might remember from the book or the movie, Too Big to Fail. The meeting is where the world is going to end on Monday unless the Fed, the Congress, or the Treasury Department does X, Y, or Z to save the financial system.
I was up to my neck in the crisis, and then was very deeply involved in the policy response to the crisis. I got pulled into the policy response by way of some relationships on the Hill, and was very involved in a number of aspects of researching and contributing to the members of Congress who wrote the Dodd-Frank Act.
The first 25 years of my career were that kind of stuff, banking and financial policy. It was as we were coming out of the financial crisis, and you’ll recall that it was very hard to get the economy going again after the crisis. The crisis was the worst financial crisis since the Great Depression. It was a terrible recession, known as the Great Recession. The economy started to grow again in the spring of 2009. The recession ended by definition in the spring of 2009, but two years into the recovery.
By the spring and summer of 2011, the economy was growing very slowly, less than 2%, or about 2%, or a little slower. Believe it or not, it’s hard to remember this, but unemployment two years into the recovery was still north of 9%, which is astonishing to think about as we sit here at 4%. This was despite what can only be described as historic or herculean policy attempts by policymakers in Washington.
As you’ll recall, we had the big fiscal stimulus, the Obama fiscal stimulus, shortly after Obama was inaugurated, if I remember correctly, that happened in March of 2009. The Federal Reserve came in hard and controversially with three rounds of quantitative easing 0% interest rates. Congress chimed in with funny-sounding programs called Cash for Clunkers, Cash for Caulkers, which you might remember are programs to dump more money into the economy.
Notwithstanding all of this stimulus, the economy was barely growing, and unemployment was very high two years into the recovery. You could feel a collective shrug here in Washington on the part of policymakers like, “We are out of ideas. We’ve thrown the kitchen sink at this problem, and we don’t have any anymore ideas.” That was very intriguing to me as the policy director and somebody who had been so involved in the crisis, in the policy response. It occurred to me that policymakers in Washington were in desperate need of new ideas as to how to stimulate economic growth and job creation.
I started doing my homework. I started to read through the research, go back to my Economics textbooks, etc. There was a bunch of research that was new at the time that you’ll remember, Gary. It was 2011, 2012, around that time period, research that had been produced by the Kauffman Foundation, by people like John Haltiwanger at the University of Maryland, Ed Prescott at ASU, and Lee Ohanian at Stanford. All these folks were studying the same thing. They were producing research that showed the following three very intriguing things, especially if you put the three together.
Number one, they were showing that startups, new businesses, were disproportionately responsible for innovation in the economy. They’re not the only source of innovation, but they are disproportionately the source of innovation because existing firms tend to innovate at the margin. They are not well-positioned and not particularly interested in major innovation or what we tend to call disruptive innovation because they’re the establishment. They’re not interested in being disrupted.
Startups aren't the only source of innovation, but they disproportionately drive it because existing firms innovate at the margin. Share on XInnovation’s True Source: Why Startups Disrupt, Not Incumbents
I did some similar research in that and found that disruptive innovations are more likely to come from unknown, unfunded, uneducated tinkerers and misfits. The example that I put in my book is a low-hanging fruit, but the Wright Brothers, who were uneducated bicycle mechanics, gave us manned flight, and Boeing gives us the modern jet. It’s the larger corporations that are good at the incremental improvement of the invention, but the invention itself is not likely to come from the well-funded R&D labs inside large corporations.
That’s true. If you go back and look at the major innovations that have defined the economic landscape over the last 200 or 300 years, the cotton gin, the steam engine, electrification, the railroads, the automobile, the airplane, as you mentioned, refrigeration.
The shipping container. That was a truck driver.
Refrigeration and air conditioning, the computer, countless applications of the internet, wireless communication, these things, all the way up through what’s happening now with AI. Virtually, all of the major innovations, the transforming or disruptive innovation, almost always come from an outsider, the entrepreneur.
The economic significance of that is that we know from the great work of Robert Solow, the American economist who taught the world where economic growth comes from in the late ‘50s and won the Nobel Prize in 1987 for this insight, that innovation drives gains in productivity, which drives economic growth. Solow’s work established a direct line between the entrepreneur and economic growth. Entrepreneurs are the disproportionate source of innovation in the economy. Innovation drives gains and productivity, gains and productivity drive economic growth. That was the first thing that all of the research was sharpening the focus on at the time that I started to do my inquiry.
Number two, and a corollary of that, if that’s true, it’s not surprising that a second conclusion was that virtually all net new job creation in the economy comes from new businesses. I didn’t believe that when I first started. I said, “Surely, existing firms create jobs.” That’s true, but they also shed jobs as they get better at what they do, as they incorporate capital and technology. On a net basis, they shed jobs plus created jobs by existing firms.
Virtually all net new job creation comes from new businesses. Share on XTim Kane at the Kauffman Foundation did an analysis in 2009 and 2010 in which he showed that if you divide all of the businesses, all of the firms in the economy into two groups, one group is older than five years, and the other group is younger than five years. The group that is older than five years, on a net basis, sheds about a million jobs a year. That means that were it not for young businesses, the job base in this country would shrink almost every year. He showed that new businesses create somewhere between 3 million and 5 million net new jobs a year.
The two things I was most interested in, accelerating economic growth and job creation, the research showed that those things come from entrepreneurs. One of the things I knew for sure, because I was sitting in Washington trying to figure it out, no one in Washington was focused on the entrepreneurial economy. They were all focused on the legacy economy.
The third thing that the research was showing, and this was the real head slapper, and what made the first two observations so significant, and this work was done by Robert Litan and Ian Hathaway principally, but also some other people, was that entrepreneurship in the United States had been in decline for four decades. Ian Hathaway and Bob Litan showed that this was not just happening in aggregate, but it was happening in virtually every major metro area in the United States and across a broad swath of industry sectors.
If entrepreneurship or startups are the key drivers of innovation, economic growth, and job creation, and if startup rates in the United States were in decline, not only is that bad, but that would potentially explain why the Herculean policy efforts in Washington were not working. It’s because policymakers were digging in the wrong place. They weren’t focused on where jobs and economic growth come from.
Entrepreneurial Imperative: If U.S. startup rates were in decline, that would explain why Herculean policy efforts in Washington weren’t working: policymakers were digging in the wrong place.
This became incredibly intriguing to me, especially when I asked Bob and Ian and a lot of the other people who were doing the research on the decline in entrepreneurship, because I called them all up at the time and I said, “I don’t believe this. How can this be the case that entrepreneurship is in decline? We are the United States of America. We have Silicon Valley, and we have a show called Shark Tank. How in the world can entrepreneurship be in decline?”
They showed me the research, and I finally understood. I asked them the $64,000 question, “Why is this happening? Why is the decline happening?” They said, “We don’t know. We have certain suspicions and hypotheses, but fundamentally, we don’t understand it.” That was incredibly intriguing to me because if we could figure out why the decline was happening, then presumably, we could come up with a policy that’s intended to turn that decline around. By turning that decline around, it re-accelerates economic growth and job creation, as policymakers in Washington were trying to do.
If the smart folks all over the country and the academics who were doing the work didn’t know, how was I going to figure it out? A colleague and I thought about that for a few months and finally decided, “If you want to know what’s going on with entrepreneurs and what’s in their way, one way of figuring that out would be to get out of Washington, DC, travel the country, and go ask them.
That’s what we did. We got the Financial Services Forum to fund the work. My colleague Courtney Geduldig and I spent the next four months on the road traveling the country and doing round tables all over the country with entrepreneurs, asking them, “What’s in your way?” It was the most transformative, fascinating experience of my life. I wrote a book about it to document what entrepreneurs told us, and to take a first crack at a policy agenda designed to respond to what they had told us.
That book was called Where the Jobs Are, and it was published in early 2014. As I was finishing up that book, it occurred to me there is no organization in Washington, DC that is specifically dedicated to working with policymakers to educate them about everything I ran through, to educate them about everything what that entrepreneurs had shared with us in terms of the barriers, problems, and the frustrations in their way, and what to do about it. I decided this was the biggest thing that had ever happened to me as a policy guy. I left the Forum and started CAE. That’s where CAE came from.
Key Entrepreneurship Insights: Innovation, Job Creation, And The Decline
I love it. For our audience, can you go through the three things again?
Startups and the entrepreneurs who launched and built them are a disproportionate source of innovation in the economy. The great significance of that is the insights of Robert Solow that innovation is the driving force of economic growth. Startups are incredibly important to economic growth. They’re also incredibly important because they are the principal drivers of virtually all net new job creation in the economy. The existing firms, while they create jobs, also shed jobs as they focus on what they do best, as they incorporate capital and technology.
Number three, between the late ‘70s and the beginning of the pandemic, and we can talk about what’s happened since the pandemic, because something very interesting has happened, as you might recall, we’ll go back to this, but there has been a spike in new business applications since the pandemic began that has persisted. There is a lot of cautious optimism that this may be the turn, the long-awaited inflection point of the four-decade decline in entrepreneurship. In any case, before the pandemic, entrepreneurship had been in decline for four decades, between 1978 and 2020.
I know that it’s reversed and it’s coming back up, but if we reach the 1970s or exceed that level, are we still below that mid-‘70s high water mark?
The decline that I’m talking about is specifically the decline of the portion of all businesses in the economy that are new. If you think about it as a fraction or as a pie, the pie is all businesses in the economy, the fraction of all businesses in the economy that are new, and that ratio fell between 1978 and 2020. The economy and all the businesses in it were becoming older, less entrepreneurial. The economy was becoming less entrepreneurial, or in the terms that economists use, less dynamic and more sclerotic, to use a biological phrase.
I am not sure, I would have to go back and check this, as to whether the spike in new business applications is in absolute terms, because when I say spike in new business applications, I’m talking numbers of new business applications. Not all of which, by the way, turn into new businesses. There are applications to start a business, but there’s a pretty tight correlation between applications and the number of new businesses. Whether we have re-attained the same portion of all businesses in the economy that we enjoyed in the late ‘70s, I’m not sure.
Moreover, there is also uncertainty about what kind of businesses are being started. In other words, in every class for every cohort, if you will, but you can think of them as classes, the annual class of new businesses, in every year, the group of new businesses, not all of those are going to be the rapidly growing, scalable startups that we tend to think about that have a big impact on job creation and economic growth. Most of the new businesses every year are going to become, we might think of as main street businesses, hair salons, restaurants, mom-and-pop type stuff, which is still very important to be sure and still create jobs and still create opportunity and economic growth, for sure. It’s all good.
I looked at some data recently. I think 89% of all businesses in the United States have nine employees or fewer.
The number I’m familiar with is that about 92% of all businesses in the United States have 20 employees or fewer. Yes, the mighty US economy that people tend to think about is the Fortune 500 companies. That is a mischaracterization. The US economy is a small business economy.
Beyond Unicorns: The Overlooked Power Of Main Street Startups
That’s my point. I go to these ecosystem conferences, and I’m often frustrated because so many of these ecosystem builders are big game hunters. They’re sitting up in a tree with a long barrel, waiting for a mastodon to come out into view. I think we’re overlooking the economic impact that’s hiding in plain sight by increasing the number of those mom-and-pop startups. We’re doing some work in North Carolina with The Entrepreneurial Mindset, disseminating across the way, working with Thom Ruhe at NC IDEA Foundation.
We can’t correlate all this to Thom Ruhe’s effort, but since he started at NC IDEA, the number of startups in North Carolina has doubled. The governor produced a report, I’m happy to send it to you, saying that a 5% increase in startups that get to sustainability, which they deem as somewhere between $50,000 and $100,000 in top-line revenue. You can do that with a lawnmower. That’s a pretty low bar. Increasing the number of those startups in a state with 11 million people from $1.5 billion to $2 billion in the state’s economy every year. I’m head-scratching when I go to the ecosystem conferences, and they’re all talking about risk capital, tech transfer. I don’t know.
All of it is important. Venture-backed, scalable, rapidly growing companies are important to be sure. To your point, only about 8% of every new company ever sees a dime of venture capital. Most startups are financed by the personal savings and assets of the entrepreneurs, friends and family, credit cards, or a unit. Most of the new businesses that are started become the future small businesses.
Entrepreneurial Imperative: Only about 8% of every new company ever sees a dime of venture capital.
Back to the new application data, there’s still a lot of analysis that is going on, trying to figure out how to characterize and what these new businesses that are starting in the wake of the pandemic are. We know for a fact that a lot of them are in the category of what is referred to as non-store retail. You’re talking about folks who are starting a business. It’s very cheap to start a business and very easy to start a business now with all the variety of digital platforms, like Shopify and Amazon.
Etsy, whatever.
There are a lot of these new business applications, and we know this for a fact. John Haltiwanger at Maryland has probably done the best analysis of a lot of this data. I should also say, before I forget, that John himself, who has been one of the heavyweight scholars of American entrepreneurship for years, and in particular, his contribution has been showing the importance of startups of all kinds to net new job creation.
John is very optimistic that this is a meaningful inflection point in the multi-decade path of entrepreneurship. This is a persistent, sustainable, and economically significant increase in the number of startups, even as he continues to try to tease out what portion of these new business applications or businesses are likely to create jobs or to hire people to make significant contributions to economic growth through innovation, those types of things.
Your fundamental point is that all of it is important. We know that every class or every group of new businesses every year has a subsection, a smaller group within it that is going to be those rapidly growing, scalable, venture-backed companies. It’s a numbers game. The phrase that Bob Litan uses to express the point that you’re making is that we want more shots on goal. The more shots on goal we have, the more new business we have created.
We know that all of them are important, but embedded in there somewhere within all those shots is the next Google, the next Microsoft, the next whatever it is. This is fundamentally good news, and we can talk about why it’s happening. What did the pandemic do or unleash that it has awakened the entrepreneurial spirit in the American people, such that we’ve had 20 million to 25 million new businesses launched since 2020? It’s a very interesting sociological and psychological thing. What was the impact of the pandemic?
That’s all good news. I want to wrap this part of the discussion up by saying, in light of the fact that CAE was created, established to address a multi-decade decline in entrepreneurship, should we just throw our hands up and declare victory and go home? We think the answer to that is no. We think that policymakers should not conclude from the spike in new business applications that their work is done. We don’t have to worry about the entrepreneurial economy anymore. We can focus on other things.
Rather, we think that this spike in new business applications and this reawakened entrepreneurial spirit on the part of millions of Americans is a historic opportunity that policymakers should lean into, to take concrete steps to reinforce and support the people who have taken the leap and to encourage others to do the same. We’ve got the wind in our backs, if you will. Now is the time to commit to an aggressively pro-entrepreneurship, pro-innovation public policy agenda to support and drive entrepreneurship in America.
This spike in new business applications and this reawakened entrepreneurial spirit on the part of millions of Americans is a historic opportunity that policymakers should lean into. Share on XCultivating An Entrepreneurial Mindset: Beyond Accidental Innovation
I’m going to pile on here. I don’t know where to begin there. You’re saying so many things that are resonating with me. You’re very clear about this, and no one would argue with this. We all understand the economic impact of entrepreneurial activity. You use different words, but it’s the engine of any economy. Entrepreneurial activity is the lifeblood.
What’s astonishing to me is that we’re essentially creating entrepreneurs by accident rather than by design. Let me get into that a little more. I made this the analogy in my book. You don’t create a soccer league expecting a 22-year-old Lionel Messi to walk off a farm somewhere, ready to play professional soccer. You start training him when he is a child. If we understand the economic impact of entrepreneurial activity, why isn’t entrepreneurial discovery learning implemented starting in middle school?
I’ve studied that a bit. Middle school, at age twelve, is when kids start to become more spatially aware of what’s happening around them and understand their place in a broader culture. I don’t know. That boggles my mind. I’ll take it one step further. I think there’s a failure to recognize the ways in which other-directed routinized learning systems systematically stifle the development of entrepreneurial attitudes, behaviors, and skills.
What we’ve seen in our work, people started using our entrepreneurial mindset programs for city government workers. I was like, “What are you doing? It’s not what it was designed for.” The mayor of Albuquerque came back to us and said, “The sanitation supervisor and his team figured out how to save the city $1 million a year.”
What I found is that the entrepreneurial spirit is the human spirit. It’s not just in some of us. It’s in all of us. Not everyone is going to start a business, but everyone is going to need to develop these basic competencies. This is where I want to get to a question I have for you. I don’t know if this data is right. You can correct me, but 5.5 million people applied for a business license in 2024. Only 1 in 10 acted on it, something like that.
There’s a lot of misinformation out there about how to start a business. If you walk into a small business development center, they’re going to tell you to write a business plan and go find debt financing. Like you, John, I spent a year traveling around the United States initially with the Cisco Entrepreneur Institute, interviewing hundreds of entrepreneurs.
That’s not what they’re doing. They’re not quitting their day jobs. They’re not risking mortgaging their house. They’re experimenting. They’re starting in evenings and weekends and developing and de-risking something. I think that’s part of the problem. That’s how we can increase the number of startups. I would wager, looking at the data I mentioned, that there are millions of people out there who have families and mortgages.
They have the desire to start something. The desire for autonomy is among the most compelling human motivators. Yet they think, “I don’t have an invention. I don’t know any venture capitalists. I’m not going to risk my family’s stability, so I’m not going to act on it.” If they understood, like, no, Saturday morning, you roll up your sleeves, you figure out what’s in your garage, what’s in your attic, take $500 and start messing around. That’s what entrepreneurs are doing.
There are a lot of reasons why people don’t decide to do that. Two other issues or barriers, both of which are on our agenda and we’re very actively engaged on, are healthcare. Many people in the United States get their healthcare through their corporate employer. That’s a major risk. If you’re going to leave that corporate job and take the risk to become an entrepreneur, you’re not going to make that break clean because it exposes your family to enormous risk. Hopefully, you start to tinker in the evening and then on weekends.
The other one, especially for women, and unfortunately, it is still the case that this burden is especially relevant for women entrepreneurs, is childcare. It is simply too inaccessible, too expensive, and is a major barrier for women who want to be entrepreneurs. You put all these things together, the certainty of salary, insurance, healthcare, childcare, and student debt is another barrier and a topic that we’re very active on.
Unseen Barriers: Healthcare, Childcare, And Student Debt For Entrepreneurs
There are a lot of people who are graduating from college who would love to work for a startup, but they can’t afford to because they have to pay $1,000 a month in student debt payments, so they take the job offer from Google or Meta instead. These are all barriers and challenges that entrepreneurs have shared with us that we’re very active on. You’re quite right. This is what makes your book so important, Gary, is that you’re exactly right. As a society, and in terms of the way we educate our next generation as a society, we do not teach kids to think entrepreneurially.
Entrepreneurial Imperative: We don’t teach kids to think entrepreneurially. By that, I mean giving them the freedom, the wherewithal, and the know-how to start a business, or even just an entrepreneurial approach to life.
By that, I mean either the freedom and the wherewithal and something of the know-how to start a business, even an entrepreneurial approach to their life in terms of experimentation and being willing to think outside the box. As you point out, lots and lots of studies show that kindergartners are incredibly entrepreneurial and love to experiment when they start at the beginning of their educational careers, if you will. By the time they graduate from high school, we’ve beaten that out of them.
Their engagement level plummets. One of the things I sussed out in my work is that Gallup has been tracking this for decades. Kids from fifth grade, the engagement at fifth grade, is like 75% of kids are engaged in learning. By the time they graduate, it’s like a third. Two-thirds of students aren’t engaged in learning. You look at the workforce. In the United States, we are the most engaged. North America, I should say. It’s two thirds are not engaged. Globally, it’s 87%.
One in five is actively hostile to the work environment. You look at entrepreneurial people, whether they own a business or work in an organization, they’re optimally engaged. Part of what I am starting to flesh out, I got invited to give a talk at the Human Flourishing Program at Harvard when the book first came out. That’s ultimately where my research and work are taking me. The entrepreneur unwittingly stumbles into this situation where they’re pursuing their interests in developing their abilities autonomously in ways that are creating value for the people around them. Those are the conditions that lead to optimal human engagement. That’s not philosophical. That’s not religious. It’s biological.
As I say, this is why your book is so important. I’m still thinking about this because it’s more complicated than it should be. To somehow share your message and insights with policymakers, there are lots of things that policymakers could do with education, with workforce training, with apprenticeship programs. There are all kinds of things that policymakers can do to facilitate a transition to a more economy-wide entrepreneurial mindset, starting much earlier in children’s educational careers. I would love to work with you on that.
Don’t get me started, John. Be careful what you ask for. By the time a kid shows up at university, by the time he is going to play in the Major leagues, he already knows the game. He’s already failed. He’s already tried a lawn mowing business. He’s already tried a couple of things and failed. He knows how to think critically and creatively.
What I said in my book, to the point of the question you asked, I don’t think the solution is that complicated. I don’t think we need to burn down the system of education. I don’t think we need to fire everybody and start over. It’s simple. We just have to add what I call EDL, Entrepreneurial Discovery Learning, in the margins. Carve out a little bit of time.
I don’t care if it’s after-school programs. We need to train teachers, give them a curriculum. The way I think about this, I’d love to get your feedback on this, but I think the fundamental difference between an entrepreneurial person and a non-entrepreneurial person is that the entrepreneur is engaged in self-directed value creation, where the non-entrepreneur is involved in other-directed value creation. One is not necessarily wrong, but what we need to start teaching kids when they’re twelve years old is figure out how to make yourself useful to another human without a guide, without a predetermined path, without a teacher or a book telling you exactly how to do it.
Also, it’s okay to do that. This is a real tragedy. Many kids are naturally inclined in that direction, but feel that it’s somehow breaking the rules.
We’re so immersed.
They’re so immersed in following directions.
The Entrepreneurial Paradox: Embracing Errors For Growth
We’re immersed in managerial culture, and this is something I said in the book. The entrepreneurial mindset only seems enigmatic to the extent that you are steeped in managerial culture. We’re so immersed in this linear thinking, productivity bottom line, other-directed, top-down. We need that thinking, don’t get me wrong. Managerial thinking is important, but that tends to be an error-reducing paradigm. You’re punished for errors. Entrepreneurial thinking is error-inducing. You’ve got to make a bunch of mistakes to find the right answer. We need to reconcile those two things.
Back to the example that you used. How many mistakes did the Wright Brothers make on their way to leaving planet Earth on that day in Kitty Hawk?
By the way, they went to Kitty Hawk from Dayton to reduce the probability that they’re going to die in the process because they wrote a letter to the War Department to find a place that was windy and sandy. “If this thing crashes, I’m not going to die.” This is something we could dive into, or you can divert away from it if you want to, but I think there’s a lot of myth around entrepreneurship.
You can say the word entrepreneur in public, and you can look at your watch and count the seconds before somebody says risk. I think there’s a lot of myth in that. Drucker himself talks about this in his book on entrepreneurship. If entrepreneurs have anything in common, it’s that they’re risk-averse. They’re micro experimenters. Richard Branson was like, “Screw it, let’s do it.” That’s billionaire speak.
When I look at entrepreneurs from 10,000 feet, it’s organic. How does an organism orient itself in unfamiliar terrain? It tries lots of little things on a small scale. It doesn’t take big, bold bets. You don’t see that anywhere in nature. We should encourage students to do that in the margin from the time they’re 10 or 12 years old.
By the way, I work with a university system in Mexico, Tecnológico de Monterrey is the number four entrepreneurial university system in the world. Their mission is to have every student graduate with an entrepreneurial mindset with a humanistic outlook. Kids come into the college, they’re put in groups of 2 or 3, and they’re given 1,000 pesos, and no other instruction, but come back with more than 1,000 pesos in three days.
I got a chance to interview a half a dozen or so of these students who had been through these experiences, and it was chaos. They bought a sack of corn, and this happened and that happened. I think on average, they came back with 4,000 pesos, which is maybe $100 or something, I don’t know. What they said to me was incredible. They all said some version of this, and they weren’t privy to each other’s conversations.
They said, “I went back into the classroom and I was no longer trying to get the A. I was no longer allowing the teacher to set the bar.” I think that’s an important piece of the component we need. The way the world is changing. I have an author from Harvard coming on my show. She wrote a book called Employment is Dead, like top-down hierarchical structures are ill-suited to a dynamic, changing world.
So much of the economy is the gig economy and side hustles that people have formalized and created their own careers. They have multiple jobs. The economy is very different than the way we still typically think about it.
I think that’s the broader message that you and I need to work together to get out into the world.
Policy’s Missed Beat: Tailoring Governance To A Dynamic Economy
Public policy has to change to reflect that. Going back to the story I told at the beginning, the reason why the policy attempts to accelerate economic growth and job creation after the great recession were failing was because policymakers were digging in the wrong place. They weren’t focused on where economic growth and jobs come from. In other words, policy has to be attuned in order for policy to be effective and to have the result that policymakers are after.
Whether that’s raising salaries or expanding opportunity or decreasing poverty or whatever it is, in order for policy to be effective, it’s got to be made for the economy that exists in the way that people live their lives and pursue their livelihoods. That’s a connection I’d love to work with you more on in terms of informing policymakers, first of all, about how important an entrepreneurial mindset is and how we need to reach our kids with that gospel earlier in their lives and their educational careers. Also, policymakers need to learn how different the economy is from the way that they typically think about it. That is pretty static because their policymaking efforts have to be aimed at the economy as it exists in the way it’s evolving.
For policy to be effective, it's got to be made for the economy that really exists, and for the way people truly live their lives and pursue their livelihoods. Share on XThere’s a huge opportunity here. I have a partnership with The Allan Gray Orbis Foundation in South Africa. The government of South Africa has mandated entrepreneurship in the entire K-12 curriculum. They hired me to help them figure that out. My first impulse was, “We’re going to get beaten at our own game.” I’m in Johannesburg, and we have 225 career and technical education teachers. This is where they’re starting. They were all lamenting about the extraordinarily high rate of unemployment in South Africa. Youth unemployment is between 16 and 25, or whatever. It’s like 60%, no jobs.
I was in South Africa in the summer of 2024, and you could see it.
Every day at the end of the training, I would go across this compound and interview local entrepreneurs. These are people starting a business with $20 or $100. Everyone of them said to me, “There’s opportunity everywhere. If this doesn’t work out, I’ll find another one.” I was struck, like, “Are you guys living in the same universe?” It represented to me the shift in perspective.
You think of the compounding effect of those teachers foisting that perspective on their students, that there are no jobs, there’s no opportunity. I don’t know. I took this quote from Desmond Tutu when he was talking about philanthropy. He said, “It’s not enough to pull people out of the river. We have to go upstream and find out why they’re falling in.” I’m saying to you, John, I’m saying to the world, it’s not enough to just support the entrepreneurs that have already jumped in the entrepreneurial river. We’ve got to go upstream and figure out why so few are jumping in.
I agree with you entirely. That’s exactly what I mean when I said that we must not interpret this spike in new business applications as a signal to back off as a society or as policymakers. Rather, it’s an opportunity to use the language that you did to run upstream and make progress on preventing more people from falling in the river. This is a historic opportunity to make progress, and we need to lean into it.
Also, I want to double-click on something you hinted at a little while back in our conversation, which is workforce development. Let’s go beyond startup. I know I’m venturing a little bit outside of your specific domain, but think about the entrepreneurial mindset as preparing people for the future of work. What I have anxiety about, if you can’t figure out how to make yourself useful to another human without the guidance of another, you’re going to become increasingly vulnerable to artificial intelligence.
We have to look at the ways in which schools are still training people to think like employees. The underlying assumptions are that the useful thing has already been established. You are expected to fulfill a predetermined role in the production of a useful thing. What’s absent are the attitudes and skills for the discovery of useful things. What I found in my research is that you don’t have to be a creative genius to do that. Ordinary people are capable of doing that, and there’s an economic opportunity hiding in plain sight.
What I’m saying is that ordinary people, that’s what I’ve seen in my work. The extraordinary ability of ordinary people. We have this visibility versus representation problem. When you say the word entrepreneur, it conjures an image of a high-growth billionaire, whatever. We’re ignoring the everyday entrepreneur that you’ve talked about. The guy who browed $5,000 from his mother-in-law is employing ten people and contributing disproportionately to his community.
Dispelling Entrepreneurial Myths: It’s Never Too Late To Start
We also have to remind people that it’s never too late. As a matter of fact, I reposted on the CAE’s LinkedIn feed an article that was done in Harvard Business School back in 2018, showcasing some research that showed the average age of the establishment of a new business, including venture-backed, high-growth, scalable companies. It’s not just mom-and-pop. It’s also the scalable high-growth technology companies.
Entrepreneurial Imperative: We all have to remind people that it’s never too late. The average age of the entrepreneur starting most new companies in our country is 45, not 22.
The average age of the entrepreneurs starting most of the new companies in our country is 45. It’s not 22. The youth are important, for sure, but we’ve got to get to people all along the age continuum. It is a tragic, wrong assumption on the part of millions of Americans that if you get to the point where you’re in your mid-30s, you’ve missed your chance to be an entrepreneur. Not true, and the data show it.
I’ve seen that data before. That’s a great example of the visibility versus representation issue. We’re all skewed to the entrepreneur being the young kid in college who drops out and becomes a billionaire overnight.
There are some of those, to be sure.
They are outliers. This is so interesting. There are so many different ways to take this conversation. One of the things that I find interesting is that the traditional definition of entrepreneur is misleading. Somebody who takes a risk in exchange for a profit, I see that as misguided. I’ve interviewed 700 entrepreneurs all over the planet. Very few of them have been singularly focused on profit. Almost to a person, there’s a purpose behind what they’re doing. There’s something that has meaning to the individuals, a problem I encountered in my life that I want to solve. I see a way to do something better. I want to right a wrong.
I think there’s a mischaracterization of the entrepreneur as the money-grabbing profit seeker. My friends in South Africa say this, “When you mention the word entrepreneur, the teacher gets up to go make tea because that’s business and I’m not interested in that.” I think we’ve got to help folks broaden that. There’s a purpose-driven component to the word.
There’s also an aspect of what you’re talking about, Gary, is we have found as we travel the country and we continue to get out of Washington on a regular basis and conduct round tables with entrepreneurs. It’s a very important way for us to stay in touch with the people that we are on whose behalf we work in Washington. We want to know that we’re focused on the right issues in the right ways. We conduct about 8 to 12 round tables in cities across the United States every year.
One of the things that we find is that when you go to the middle part of the country, frequently, and this is more the case when you talk to policymakers in the middle part of the country, even development officials, city council people, mayors, etc., we unfortunately hear sometimes, if we’re in a state like Indiana or Ohio or Western Pennsylvania, Alabama, “Entrepreneurship isn’t a thing here. We’re not Silicon Valley.” As if entrepreneurship is a phenomenon of the coastal innovation hubs, but is not important and doesn’t have a role or meaning in the middle part of the country.
This is tragic because that’s exactly where entrepreneurship and entrepreneurship-driven economic development and opportunity creation are most needed. You’re right. There’s this weird, narrow perception of entrepreneurship, both in terms of who entrepreneurs are, what they do, how old they are, what they are motivated by, and where that activity happens geographically, that we need to work on in terms of expanding.
Steve Case has done so much important work on this with his The Rise of the Rest initiative, trying to point out that there are great entrepreneurs and great and great ideas for great innovative companies everywhere. It’s just a matter of taking the steps to support those folks and give them the support and tools that they need to do what entrepreneurs do best. There is a lot of work to do.
Do you know what’s interesting? I think about here’s this line and you’re doing these roundtables exploring what people need to keep going and growing. Essentially, what’s in their way? You’re talking to people who have already started, and what’s in their way. I’ve been traveling across the country almost as your alter ego, interviewing entrepreneurs, like an anthropologist. I’m trying to suss out the underlying values and assumptions of which the entrepreneurs themselves aren’t aware.
What are the common and controllable factors that either encourage or inhibit the tendency to be entrepreneurial? To use a term from social psychology, specifically from a policy perspective, we’re making this colossal fundamental attribution error. It is the tendency to look at a person’s behavior and ascribe it to who they are, while ignoring the constellation of cognitive, motivational, and situational factors that are acting on that individual.
Do you see what I’m saying? We’re all defaulting to a default assumption that entrepreneurs are somehow born with what the economist Frank Knight described as scientifically unfathomable traits, when in fact, it’s an impulse. When I was at Harvard back in November, I walked into the Psychology building, John, and there was a quote from William James on the wall in brass letters.
The National Debt Crisis: An Entrepreneurial Solution
It said, “The community needs the impulse of the individual, but without the support of the community, the impulse will die away.” Put the word entrepreneur in there. The community needs the entrepreneurial impulse. I wrote in my book, “What if we treated it like sports?” What if your fifth-grade kid was encouraged to figure out something that could solve a problem, and parents showed up and cheered him on and gave him $100? Keep going. That demonstrates that we value this, and I think we could make a major impact in our economy that way.
Let me, if I might. I have to do this. It underscores what you’re talking about in very specific terms in a way that I think is not only very meaningful to policymakers, but the whole country seems to be not just very concerned with this, but is being largely animated by this in terms of our politics and the national discussion and what have you. I’ll do this as quickly as I can.
We have a very big problem in the country right now that everybody seems to agree with. It’s called the national debt. The concern about this problem is what is undermining a great deal of trust in policymakers and our political system. Our political system seems simply incapable of dealing with this. Even with a Republican president and a Republican Congress and many conservative Republican policymakers who define themselves and the reason why they ran for office, what was their concern about the national debt?
When you can point to specific groups in Congress, like the Freedom Caucus, which is a very conservative group of congressmen who were extremely animated and upset about this issue, and yet the Congress passed on pretty much party-line votes, or it was basically a party-line vote. In the Senate, the vote was 50 to 51. JD Vance broke the tie. There were only a couple of Republican senators who voted against the One Big Beautiful Bill, as President Trump called it.
In the House, it passed on a virtually party-line vote, with all Republicans voting for it, including the Freedom Caucus members. One of the implications of the legislation is that it increases the national debt over 10 years by an additional $5 trillion, even though everybody is supposedly incredibly bothered and disturbed by the fact that we’re $38 trillion in debt.
The point here is our political system simply seems incapable of taking the steps from a policy standpoint in terms of taxation and government spending, taking the steps on both sides of that ledger, the very difficult political steps that are necessary to balance the budget seem impossible. We seem incapable of coming to terms with this issue. In fact, our inability to come to terms with this issue is the reason why the country’s debt rating was downgraded. Moody’s decided American policymakers simply don’t have the wherewithal or whatever it takes to come to terms with this.
That leaves us a lot of people thinking, “Are we doomed? Are we doomed to financial oblivion? Is this the way that American democracy is going to die, drowning in debt? Is it hopeless?” It’s not hopeless. There is another way to deal with this, and it’s entrepreneurship, and I’m going to prove it to you. I’m going to prove it to you with numbers. I’m in the middle of writing a piece on this, but I’ll preempt myself by sharing it with you on your show. For 55 years after World War II, essentially from 1947 until the year 2000, the US economy grew at an average annual real rate, real economic growth, average annual real economic growth for 55 years of 3.5%. Not every year. Some years were faster, some were slower. On average, we grew at 3.5% year over year on average for 55 years. That rate of economic growth helped create a very strong middle class and propelled the United States after World War II to being the most powerful economy in the world.
The US economy has not grown at 3% or better. In other words, we’ve been stuck in the 2% since 2005. The US economy has not grown at 3% or better since 2005, with one exception. That was the year after the pandemic. There was a snapback after the pandemic, where the economy grew at about 5.8%. Subsequent to that, it reverted back to the mean, and we’ve been stuck at about 2.3% to 2.5% for 20 years.
You might not think that the difference between the US economy growing at 2.3% annually versus 3% or 3.5% is a big deal. In an economy the size of the United States, a 1% slower rate of growth, but particularly over time, year over year, is an enormous difference. These are the numbers. I’ve run the numbers. If the US economy were to grow at 3%, not even the 3.5% that we grew at for 55 years, just get back to 3% on average sustained year over year, over 25 years, the US economy would produce, in addition to the economic output that we’re producing at 2.3%, additional economic output or economic growth of $145 trillion in GDP. We’re leaving that on the table because we’re growing at 2.3%.
How does that relate to the national debt? There is a very interesting relationship between GDP and federal tax receipts, and there’s a guy who pointed this out, a financial analyst in San Francisco. I believe it was back in 1991. It might have been ‘93. His last name is Hauser. I forgot what his first name is. It’s referred to as Hauser’s Law. He realized that if you go back and you look since World War II, federal tax receipts, the number of dollars taken in by the treasury has averaged about 17% of GDP since the end of World War II, regardless of where federal tax rates are.
Policymakers argue over what tax rates ought to be, but of course, tax rates tend to have an influence on economic growth. In terms of what has been taken in dollars of federal tax receipts, it stays pretty constant regardless of where federal tax rates are. The average is about 17% of GDP. If we were to get over 25 years, an additional $142 trillion or $145 trillion in economic growth, 17% or 18% of $142 trillion is $25 trillion in additional federal tax receipts over 25 years.
On top of the federal tax receipts, we’re already generating at 2.3% or 2.5% growth. We $38 trillion in debt right now. Do you think we could use an additional $25 trillion over the next 25 years? If we could get back to 3.5%, the average rate of growth that we enjoyed for 55 years, we would generate an additional $38 trillion or $39 trillion, almost $40 trillion in additional federal tax receipts over 25 years.
Where does economic growth come from? Where does faster economic growth come from? It comes from gains in productivity driven by innovation, which comes disproportionately from startups. Startups, an aggressively pro entrepreneurship, pro innovation agenda that includes your vision of teaching the next generation the entrepreneurial mindset, and getting them increasingly active as entrepreneurs, or even applying an entrepreneurial mindset to whatever they do. This is the national agenda. An aggressively pro-innovation, pro entrepreneurial, pro-entrepreneurial mindset agenda is the solution, the pathway out of our indebtedness. That’s expressing what we’re talking about in very concrete, problem-specific terms. This is what it means.
Overcoming Policy Blind Spots: Subtle Shifts In A Dynamic Economy
There are a couple of things that come to mind here. One is back to the beginning of the conversation, where you saw the policymakers run out of ideas. What came to my mind was, I think it was Maslow’s assertion, or maybe it was Nietzsche, I don’t remember, but he who is good with a hammer thinks all his problems are nails. You’re amplifying this message.
What I’m taking away from your comments and your conversation is that sometimes a subtle change can make a big difference. I don’t think the solution to the problem, the answers to the problem, are that complicated. What we have to help policymakers understand is the impulse to be innovative and entrepreneurial. Do you know who wrote about this? You wouldn’t guess in a million years. I’m going to tell you. Karl Marx. Marx himself said, like, the desire to fulfill needs and to solve problems through our own effort is essential to our human nature. When we’re estranged from that, we check out, we become alienated. I think the answer is simple. Encourage kids.
I put it like this as I’m sitting here and listening to you. The entrepreneurial mindset and the entrepreneurial lifestyle, if you will, the approach to life, is not something that has to be taught. It’s something that we’re born with that we beat out of people by way of our education system. There are more specific and concrete, and smart things and methods, I’m sure. However, in general, what we need to do is to allow that kids’ basic nature as human beings, as Marx observed, to tell them it’s okay to pursue that and to not actively discourage and beat it out of them with an education system and rules of society that actively discourage them. Isn’t that your message?
What we really need to do is to allow the kids' basic nature as human beings and to tell them, 'It's okay to pursue that,' and to not actively discourage and beat it out of them. Share on XThat’s exactly the message. The impulse is in there, and it’s being squashed. It’s not valued by the community. It’s not valued by the education system. As my friend Tony Wagner said, we’re creating innovators and entrepreneurs by accident rather than by design. I took Jaime Casap, who also endorsed my books, the former head of Google Education, all-time favorite quotes, John. “Let’s stop asking kids what they want to be when they grow up, and let’s start asking them what problems they want to solve and what they need to learn in order to solve those problems.”
What I wrote in the book, this entrepreneurial discovery learning, was inspired by a psychologist from the ‘60s, a very prominent psychologist at Harvard named Jerome Bruner, and he wrote about the cognitive benefits of what he called discovery learning. It’s not discovering something new to mankind. It’s just discovery.
I added the entrepreneurial component to it. By that, what I mean is to discover how you can make yourself useful. Pay attention to your gifts, to your interests, your abilities, and follow those and develop those. I was walking on the beach in Orange County, and I watched these two thirteen-year-old kids come crawling right out of the Pacific Ocean. They’re snorkelers and fins, they’re not scuba divers. They come marching right out of the ocean, and they have a bag full of lobsters.
I stopped them. I was like, “What are you guys doing?” They’re all excited. They tell me about the lobsters and how they know how to find them. Every day, they go out there and they catch 2 or 3 lobsters and they sell them. These kids were thirteen years old. I looked at them and I said, “Who taught you guys how to do this?” One of them pointed to the other and said, “He did.”
I said to them, “Is there anything in school that you’re learning that’s exciting to you in this way?” They looked at each other and looked back at me and said, “No.” I don’t think it would take much to change that. If we introduce some entrepreneurial discovery learning early and often, we could hit those numbers. It’s going to take us a decade, but we could hit the numbers. We could get to 3.5%, I think.
Fostering A Problem-Solving Mindset
If we do, it changes everything. If we don’t, it changes everything. We’re at a point now where we’re desperate for ideas, and we need to get back to the power of our own nature, and that is to be problem solvers and entrepreneurs. I’m thrilled to be an evangelist of your message, Gary, and I would love to work closely with you. I greatly appreciate your reaching out and the opportunity to come on and talk with you about this.
I’d love to talk with you more and think more concretely about how to bring your message to policymakers in Washington to see if there are things that Washington can do to facilitate what we’re talking about and to encourage it. I think that this is an idea whose time has come, and the country is desperate for it.
The last thing I’ll say about our work, that I discovered we created the initial Ice House Entrepreneurship Program through the support of the Kauffman Foundation. It’s been out in the world for years. We discover that what we do better than anything is train teachers. The teachers show up at our training expecting to learn something, and they become impacted emotionally. They see opportunities in their own lives.
Once the teacher becomes engaged like that, give her the tools and get out of the way. It’s not that complicated. Again, it’s that impulses in there. Our job is to give it room to set it free. I’d be happy to follow up with you, John. We’re winding down here. Any final thoughts you’d like to share with our audience?
The only thing I would say, first of all, thank you again for being on and having the opportunity to talk more with you about this. It’s always so fascinating to hear your ideas, and there’s such a symbiotic relationship between your gospel and the work that we are trying to do here in Washington. I would encourage folks, if they’re interested in the nexus of public policy and entrepreneurship, if they have even a gut feeling as to why that’s important, follow us.
Go to our website, StartupUSA.org. All kinds of information about our agenda, activities, op-eds, white papers, etc. Follow us on social media, on Twitter and on LinkedIn to stay up to date on what we’re doing. As a matter of fact, I posted a piece on LinkedIn about the tax changes in the One Big Beautiful Bill.
I hate calling it that, but that’s what it’s called. There are a number of very controversial aspects of that piece of legislation that everybody is well aware of in terms of cuts to Medicaid and food support programs, and the allocation of tax cuts, and that’s all very unfortunate. All of that notwithstanding, there are some very important tax policy changes that are very exciting and very important in their support for entrepreneurship in the bill as well that CAE and other organizations advocated strongly for in the debate that led up to the passage of that bill, which was signed on July 4th, 2025.
There’s a piece that I put on LinkedIn about those three specific changes. Folks should follow us, stay in touch, and get in touch with ideas. If they’d like for CAE to come to their town, do a roundtable with the local entrepreneurial community, we’d be delighted to be invited. Thank you for the opportunity to come, Gary. I appreciate it.
John, I can’t thank you enough for being on this show. We could go on for another hour and a half. Thank you not only for sharing your view on this show, but for the work you’re doing. I can’t think of anything more important we could be doing at this point in time. Whatever we can do to amplify your voice, please. I love the work you’re doing, so thank you.
Likewise. Thank you very much, Gary.
Important Links
- John Dearie
- Center for American Entrepreneurship
- Financial Services Forum
- Where the Jobs Are
- Employment is Dead
- The Rise of the Rest
- Center for American Entrepreneurship on LinkedIn
- Center for American Entrepreneurship on X